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MODULE 3

SURPLUS VALUE
The Origin of Surplus Value
Profit is a central category in the social relations of our society and so too was it for
Marx. The fact of profit intrigued him and his solution to understanding it was to
revolutionize our way of understanding those societies we were to come to know as
capitalist. He situates his understanding of profit with respect to commodity exchange
and approaches the problem by identifying two forms in which commodities can
circulate.1 Capitalist circulation or the circulation of money as capital is described by the
circuit M-C-M where money (M) is laid out to purchase a commodity (C) which is then
sold for money (M). In contrast the simple circulation of commodities or the circulation
of money as money is described by the circuit C-M-C where a commodity (C) is sold for
money (M) in order to buy another commodity.

In capitalist circulation one buys in order to sell. In simple circulation of commodities


one sells in order to buy. In simple circulation the aim is to obtain a use value. But in
capitalist circulation the aim is to obtain an exchange value which has to be greater than
the M initially laid out. So M-C-M has to become M-C-M', where M' = M + M; i.e.
value has to be valorized or expanded. In simple circulation, on the other hand, one
throws money into circulation to obtain a final goal outside circulation (i.e. the
consumption of the use value obtained.) But in the circulation of money as money capital
money is thrown into circulation as an end in itself: so as to throw more money into
circulation in the future. In the circulation of money as money, therefore, money is
simply a facilitator of exchange. But in the circulation of money as capital, money is in
addition a store of value: The independent form, i.e. the monetary form, which the value
of commodities assume in simple circulation does nothing but mediate the exchange of
commodities, and it vanishes in the final result of the movement. On the other hand, in
1

This approach, it should be noted, is no mere methodological ruse. Marx saw these two types as related
historically, the circulation of money as capital growing out of the contradictions of social forms dominated
by the circulation of money as money.

the circulation M-C-M both the money and the commodity function only as different
modes of existence of value itself, the money as its general mode of existence, the
commodity as its particular, or, so to speak, disguised mode, (p.255).

All Marx has done up to this point, however, is identify a distinctive phenomenal form:
the purchase of commodities for a given sum with the intent of selling them at some
future point in time for more. He next moves on to trying to understand where this
increase in value comes from: how is it that commodities bought at one value (M) can
then be sold at another value M'? Where does the surplus value originate?

In considering this question Marx divides the possibilities into two: On the one hand it
might be that the increase in value occurs within circulation. On the other hand it might
occur within production: i.e. somewhere between C and M' so that the original M-C
phase can be ignored. Are either of these two possibilities reasonable? The answer is
No, though the appeal to the circulation-production distinction is not accidental and in a
sense Marx is setting the reader up for his own solution. As we will see, an increase in
value could not take place within circulation but nor can it occur without circulation. The
additional value is produced but its necessary precondition is the circulation of
commodities: in particular the existence of markets in labor power the laying out of M
for C where C is labor power.

Thus, it might be that valorization occurs in circulation by means of every seller selling
for 10% above what he/she gave for the commodity. But then every seller has to be a
buyer so individual gains would be cancelled out and the only effect would be an increase
in the price level. Alternatively some person might be able, by subterfuge, speculation, to
buy cheap and sell dear. But all that results from that is a redistribution of value rather
than an increase in its total. Marx also dismisses explanations of surplus value which
confuse use value with value: i.e. the argument that both parties gain in an exchange
because each gives away something of less use to him/her than what he/she gets in return.
The other possibility is that valorization occurs entirely outside of circulation (p.269).
Thus, the commodity buyer can add value to the purchased commodities through his/her
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own labor (note please! in this instance his/her own labor would not be a commodity
since it would not have been purchased very important to understanding Marx's
argument here). But the reason the transformed commodity now has more value is
because it now contains a greater quantity of labor: the commodity originally purchased
i.e. the raw-material has not valorized itself; it has not annexed surplus value during
the making of the boots. Hence the valorization of value cannot occur outside of
circulation: Capital cannot, therefore, arise from circulation, and it is equally impossible
for it to arise apart from circulation. It must have its origin both in circulation and not in
circulation. So how can this dilemma be resolved? Focusing on the M-C-M' sequence
Marx argues that the increase in value cannot occur in the sale of the commodity
produced since the act of sale merely realizes the value of the commodity it pays for; the
customer hands over money equivalent to the value of the product. He concludes that
valorization must take place in at least one of the commodities purchased. But it cannot
be an increase in the value of the commodity purchased since equivalents exchange: the
purchaser lays out money equivalent to the value of the commodity purchased. Rather
valorization must originate in the use value of at least one of the commodities purchased
as inputs to the labor process; and so it is:
In order to extract value out of the consumption of a commodity, our friend the
money owner must be lucky enough to find within the sphere of circulation on
the market, a commodity whose use value possesses the peculiar property of
being a source of value, whose actual consumption is therefore itself an
objectification of labor, hence a creation of value. The possessor of money does
find such a special commodity on the market: the capacity for labor, in other
words labor power (p.270).

The secret of surplus value is that labor power is a use value with a peculiar property: it
can produce more value than it itself embodies. This means that it is possible for the
owner of money capital to extract surplus value by making the worker produce more
value than his own labor power is worth. Competition with other owners of money
capital, moreover, means that the owner of money capital has to, is compelled, to make
workers produce more value than their own labor power is worth. This is the secret of
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profit and therefore capitalist exploitation. But how in fact is, the surplus value extracted
from the worker?

The question is closely bound up with time and the part it plays in Marx's theory of value.
Value is socially necessary labor time. So in the labor process, the process, that is,
through which labor power is expended on objects of labor using various tools, machines
or instruments of labor, there has to be some time that is surplus to the time it takes to
produce value equivalent to the value of labor. The labor process, in other words, can be
conceptualized as divided up into necessary labor time and surplus labor time; or, stated
in value terms, the time devoted to producing value equivalent to the value of the
worker's power to labor and the time devoted to producing value surplus to the value of
the labor power which the capitalist has hired.

The way I have stated this immediately suggests one way in which surplus value can be
extracted prolong the workday beyond the point at which the worker would have
produced value equivalent to the value of his/her own labor power. This is what Marx
called surplus value in its absolute form: in this case, holding necessary labor time
constant, surplus labor time is extended. Marx also defined surplus value in what he
called its relative form. In that case, holding the sum of necessary and surplus labor time
constant, necessary labor time is reduced relative to surplus labor time. Although there
are ways of extracting absolute surplus value additional to extensions in the length of the
workday beyond surplus labor time, workday length does allow one to easily illustrate
what is at stake in this contrast between absolute and relative surplus value. Thus,
absolute surplus value increases as the length of the workday increases. Relative surplus
value is appropriated when reducing necessary labor time relative to surplus labor time,
while holding the length of the workday constant.

Absolute Surplus Value


The longer the working day, therefore, and holding necessary labor time constant, the
more surplus value the capitalist can appropriate in its absolute form. The working day is
a fluid quantity but it has limits. Its lower limit is defined by the fact that under capitalism
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it has to be more than necessary labor time. Its upper limit is more difficult to define but
Marx identifies two factors as determining it. The first is the fact of physical limits to the
expenditure of labor power: after a certain point one just cannot go on. And the second
are what he calls moral limits: the need for a certain part of the 24 hours to be set aside
for cultural development.

The capitalist wants as long a work day as possible. The worker wants to reduce it
consistent with the peculiar nature of the commodity he/she is selling: a force that needs
husbanding and protecting from irreparable damage. Force decides between these equal
rights, that of the capitalist maintaining his right as a purchaser and that of the worker to
conserve his/her natural powers. This is the context for political struggles over the length
of the workday, struggles that occurred in all the advanced capitalist countries and which
are ongoing: think of the 35-hour wage week achieved in France and current attempts to
increase it. Capitalists recognize the damage they are doing to their (collective)
workforce but competition one with another makes unilateral limits on the workday
difficult. Marx says, somewhat ambiguously:
Capital takes no account of the health and the length of life of the worker,
unless society forces it to do so...But looking at these things as a whole, it is
evident that this does not depend on the will, either good or bad, of the
individual capitalist. Under free competition, the immanent laws of capitalist
production confront the individual capitalist as a coercive force external to him
(p.381.)2

Relative Surplus Value


When we turn to examine relative surplus value in more detail it is important to
distinguish between two ways in which it can be increased, one permanent and the other
temporary:

The permanent way in which surplus value is increased is through reductions in the value
of workers' means of subsistence. In this way the value of labor power is reduced so that
2

The politics of this is explored in some detail in fn. 82 on p.381.

necessary labor time falls relative to surplus labor time (Marx assumes that the length of
the work day is held constant). Hence assume that

The value of labor power is $20 per day.

The length of the work day is 10 hours.

Necessary labor time amounts to 5 hours: so during 5 hours the worker turns out
products embodying $20 additional value over and above the value of the constant
capital that went into them; the $20 worth of abstract labor embodied in the
products during the rest of the workday is the capitalist's surplus value.
Alternatively expressed each of the 10 products produced during the workday
contains $2 necessary labor, and $2 of surplus labor.

There is only one subsistence good: food (so each worker needs food equal in
value per day to $20).

Now assume a revolution in the production of food so that its value falls by 50%.3 In
other words the value of labor power can now fall from $20 to $10. This means that
necessary labor time is also halved, from five to two and one half hours and surplus labor
time goes up by 50%: i.e. from $20 to $30. Hence an increase in surplus value in its
relative form.

Now consider the way in which the capitalist can increase surplus value in its relative
form by his/her own technological innovation but not necessarily in a permanent way
(unless we are talking about a capitalist in those sectors of the economy producing wage
goods or means of production that are used in the production of wage goods!). Assume:

The value of labor power is $20 per day (again).

The length of the work day is 10 hours (and again).

During each hour of the 10-hour work day the worker turns out 1 finished product
containing $2 of necessary labor time, $2 of surplus labor time and $2 = the value
of the constant capital (the value of the object and instrument of labor). Hence
each product has a value of $6. This is the same as dividing up the workday into 5
hours of necessary labor time and 5 hours of surplus labor time.

One of the reasons that wheat prices fell in the late nineteenth century was the increase in the productivity
of farm labor in the wheat growing regions of the US: a result of the high fertility of soil which had hitherto
not been intensively cultivated so that each employee was producing more wheat in a given period of time.

Now assume that our capitalist sees a way of reorganizing his workplace so that
the product can be cheapened. Instead of producing 10 products per day each
worker now produces 20 products per day.

Now, says Marx, this means that the individual (n.b.) value of the product has fallen from
$6 to $4 ($1 of necessary labor time, $1 of surplus labor time and $2 = the value of
constant capital). Necessary labor time embodied in each product has fallen from $2 to $1
but that part of the working day which is necessary labor time remains at 5 hours: each
worker produces in a 10 hour workday 20 products, each of which contains $1 of
necessary labor and $1 of surplus labor, which yields during the workday $20 of
necessary labor (which is, of course, the value of labor power) and $20 of surplus labor.
In other words, the worker's day can be divided so that during one half (i.e. 5 hours)
he/she produces products equal in terms of newly embodied labor time (over and above
constant capital) to the value of his/her own means of subsistence; during the other half
he/she produces surplus value.

However, assuming that our capitalist will still sell the products at what Marx calls here
their social value (i.e. their value according to socially necessary labor times) instead of
their individual value (i.e. the labor time he has been able to achieve through his
innovation) then each product will continue to sell at $6 which means that after our
innovating capitalist has paid for the value of the labor power and constant capital going
into the product he has left over $3 of surplus value. In other words, for this innovating
capitalist necessary labor time has shrunk from one half of the working day to onequarter while surplus labor time has increased from one half to three quarters! This is due
to the fact that the surplus labor embodied in each of his products is in a ratio of 3:1 to the
necessary labor embodied in each of his products, always assuming, that is, that the
products are selling at their social value and not their individual value.

Nevertheless, and assuming that the innovation is not in those sectors of the economy
producing wage goods or means of production employed in wage goods branches, this is
a temporary increase in the rate of surplus value. The reason for this is that as soon as
other capitalists adopt the innovation so that the socially necessary labor time involved in
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producing the item falls from $2 to $1 then the social value of the product will fall from
$6 ($2 = the value of labor power, $2 = surplus value and $2 = constant capital) to $4 ($1
= the value of labor power, $1 = surplus value and $2 = constant capital).

This result needs explaining. First, the value of labor power has not gone down; it
remains at $20 per day. Second, since the worker now produces at twice the speed as
before, the socially necessary labor time embodied in each product has gone down from
$2 to $1 which means that the worker must work 5 hours (as before) to embody value
equivalent to the value of his/her own labor power. Given a 10 hour day this means that
surplus labor time also remains at 5 hours. Each of the (surplus) products produced
during that period contains the same $1 of socially necessary labor as the products
produced during the necessary part of the working day. So the capitalist's surplus value =
$1/product.

But to the extent that revolutions in productivity seize those branches of production
producing means of subsistence or those providing those branches with means of
production, then the reduction in necessary labor time will be permanent and will affect
all branches of production. What drives forward the search for and application of more
productive forces of production is the same competition that drives the capitalist to try
and widen the difference between individual and social value, as per the paragraph above:
Capital, therefore, has an immanent drive, and a constant tendency, towards increasing
the productivity of labor, in order to cheapen commodities and, by cheapening
commodities, to cheapen the worker himself (p.437.)

Forms of Surplus Value in Theory and in Practice


Even so, useful as the distinction between the absolute and relative forms of surplus value
can be and it certainly helps in understanding the history of capitalist development and
the shift from absolute to relative forms (albeit not to the total exclusion of the former)
it does have limits. We need to be aware of other ways of increasing surplus value which
cannot be so easily accommodated by this distinction. Two cases in point:

1. News stories about decisions of firms to close plants in North America and open new
ones in China are commonplace and are often accompanied by explanations in terms of
relative wage levels. Undoubtedly the wage difference plays a part and suggests that the
firm is increasing its appropriation of surplus value by hiring workers whose labor power
is cheaper: for whom the value of labor power is lower. In other words: Increasing
surplus value is not necessarily due to a lengthening of the workday / speedup since these
limits to capitalist exploitation could apply in China as well as in North America.
Likewise, this method of increasing surplus value does not easily fit into images of
appropriating value in its relative form since the decrease of necessary labor time relative
to surplus labor time is not being accomplished by increasing the productivity of workers
(through providing them with improved instruments of labor and / or through reorganizing the labor process.)

2. Surplus labor can also be increased for the capitalist to the extent that the velocity with
which capital circulates can be increased. If I start out the year with one million dollars to
lay out for labor power and means of production, the more quickly I can get that one
million dollars back the more quickly it can be laid out for new (or re-hired) labor power
and means of production. If I can make my money capital turn over five times in a year,
then I appropriate four times more surplus value than if it only turned over once:
Constant capital, the means of production, only exist, considered from the
standpoint of the process of valorization, in order to absorb labor and, with
every drop of labor, a proportional quantity of surplus labor. In so far as the
means of production fail to do this, their mere existence forms a loss for the
capitalist, in a negative sense, for while they lie fallow they represent a useless
advance of capital (p.367.)
This increase in the velocity with which capital circulates is the point of the shift system.4

We should also note that speeding up the velocity with which the capital locked up in instruments of
production is extracted, as well as increasing the number of production cycles and hence the surplus value
appropriated in a given period of time, also protects the capitalist against the implications of the social
obsolescence of those instruments: social because it has nothing to do with their physical deterioration but
with the threat to their value that comes from the invention of machines that allow labor power to be more
productive. Once a faster machine is invented so that it transfers less value to each finished product
[assuming the machine has the same value and physical life as old machines], then that will lower the

The Value of Labor Power


Clearly in talking about surplus value the concept of the value of labor power has central
significance. Marx says that: The value of labor- power is determined, as in the case of
every other commodity, by the labor-time necessary for the production, and consequently
also the reproduction, of this specific article. in so far as it has value, it represents no
more than a definite quantity of the average social labor objectified in it (p.274.) But this
is not nearly as simple as it sounds and requires elaboration.

There are several things we need to consider here. Marx recognized, for example, that
the necessary requirements of the worker, the commodities required in order to
reproduce his/her labor power, could vary tremendously. As he wrote:
... The number and extent of his so-called necessary requirements, as also the
manner in which they are satisfied, are themselves products of history, and
depend therefore to a great extent on the level of civilization attained by a
country; in particular they depend on the conditions in which, and consequently
on the habits and expectations with which, the class of free workers has been
formed in contrast, therefore, with the case of other commodities, the
determination of the value of labor power contains a historical and moral
element (p.275.)
But even this leaves too many dots not joined up. There is a dynamic in the determination
of labors standard of living that is not as emphasized as it might be here, even though
Marx talks about how the determination of the value of labor power contains a historical
... element. Of what does that dynamic consist? Obviously the organization of labor
around demands for increased wages is part of that, but what might provoke those
demands and how are they bound up with the logic of capitalist development?

One window on this is opened by thinking about the way in which luxury goods become
wage goods. Capitalist development is technically innovative not just in terms of how
existing commodities are produced but also in the production of new commodities. Many
constant capital costs for those capitalists adopting it. But for those capitalists using old machines that
produce more slowly, constant capital per product will be higher.

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of these start out as luxuries and so are not something that members of the working class
find necessary to reproducing themselves. But luxury goods have a nasty habit of being
transformed into wage goods. They become necessities without which it becomes
difficult to be a wage worker. The slow growth in the ownership and use of the
automobile gradually transformed cities in terms of their built form, slowly eroded
alternative modes of transport as options and so made it almost absolutely essential as a
means of getting to work. Workers now need wages of sufficient magnitude as to cover
not just the cost of an automobile but also the considerable expenses of maintaining and
using one. The conversion of the kitchen refrigerator from luxury to wage good could be
reconstructed in similar ways. It is no longer easy to buy groceries without buying them
in a form that requires refrigeration, though obviously things are a bit more complicated
than that. People can, after all, drink beer warm but for some reason they have got to like
drinking it ice cold.

Capital also plays an active role in converting luxury goods into wage goods. It wants to
realize its product and expanding markets is an obvious way of doing that; hence the
power of the advertising industry but also pressure on government to make available the
infrastructure that complements the use of those goods. You can't persuade people to buy
vacuum cleaners and TV sets unless they are hooked up to the electricity grid: an
important factor in the decision of apartheid governments in South Africa to electrify the
townships. Without the pressure of the electrical goods industries in that country it would
not have happened.

Capital has also intervened with respect to other items of the reproduction of labor power.
Given the nature of capitalism, periodic unemployment can be a reality for more than a
few. So how to reproduce the labor power of those workers until the economy picks up
again and there is a demand for their labor power? Marx commented on this in his
discussion in Capital Vol 1 of the famous Lancashire cotton famine that accompanied the
American Civil War: a result of the blockading of Southern ports by the North. The
concern of the mill owners in Lancashire was that without some government relief of the

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textile workers they would emigrate. As a representative of the employers stated it in a


letter to The Times:
I advise (the government to make) a loan ... extending it may be over two or
three years, administered by special commissioners added to the Boards of
Guardians in the cotton districts, under special legislative regulations enforcing
some occupation or labor, as a means of keeping up at least the moral standard
of the recipients of the loan ... can anything be worse for landowners or masters
than parting with the best of the workers, and demoralizing and disappointing
the rest by an extended depletive emigration, a depletion of capital and value in
an entire province? (pp.721-722.)

The value of labor power also includes the cost of special training. Every university
student who has taken out a loan to pay for tuition expects to get some job that will
provide compensation for that expense. Marx certainly saw the cost of training as being
part of the value of labor power though obviously much of that cost is absorbed by the
welfare state through the universally free public education system. So the way in which
this gets represented in what workers demand is indirect, and through the burden of taxes
in particular. Talk about education also reveals what some might identify as Marx's sexist
tendency to take the labor of women in the home for granted. Given the standard gender
division of labor at the time Marx was writing, and still to a considerable degree today,
the labor of women contributed to the reproduction of labor power of wage workers in a
very substantial way indeed, in the form of food preparation and laundering, as well as
maintaining the home. But this was not wage labor, so assigning a value to it in the sense
of value theory would have been fraught with difficulty. Even so, the tendency has been
for the value of labor power to represent to some degree the need to reproduce those
particular use values.

In South Africa the mining industry has historically been a major employer of migrant
labor. Moreover, it was also a staunch opponent of the permanent urbanization of the
miner along with his family. The reasoning behind this was that as a migrant worker the
worker's family would stay behind in the native reserve and support themselves by
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cultivating a plot of land, and grazing some cattle and goats. But, or so the argument
went, bring wives and children to the city and wages would have to expand to support
their subsistence needs, housing and public services for them like schools.

This also raises the question, however, of reproducing future generations of wage
workers. As Marx wrote:
The owner of labor power is mortal. If then his appearance in the market is to
be continuous and the continuous transformation of money into capital assumes
this, the seller of labor-power must perpetuate himself in the way that every
living individual perpetuates himself, by procreation. The labor-power
withdrawn from the market by wear and tear, and by death, must be continually
replaced by, at the very least, an equal amount of fresh labor power. hence the
sum of means of subsistence necessary for the production of labor-power must
include the means necessary for the worker's replacements, i.e., his children, in
order that this race of peculiar commodity-owners may perpetuate its presence
on the market (p.275)
Obviously the South African mine owners believed that they had found a way round this
problem.

As Marx points out, the reproduction of labor power is a necessity in all modes of
production. The incentive structures under which it operates, however, have varied in
accordance with variations in production relations. As a class, the capitalist class as a
class has an interest in the reproduction of the working class. It is upon a healthy working
class, well-fed and well housed, educated to handle the tasks it is called upon to do,
equipped with the means of transportation to get to the work place that its profitability
depends. But for individual employers the logic of the situation is one in which they can
ignore whether or not the labor power of their workers is reproduced since they can
employ others. This is in sharp contrast to servile forms of labor (slavery, feudalism)
where this is not the case. In slavery, the slave is necessarily treated like livestock and the
same concern over the health and strength of the worker is expressed. If the slave drops
dead from fatigue or ill-health then another has to be purchased at a considerable price
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(i.e. not the weekly or monthly 'rent' that the capitalist pays for use of the immediate
producer's labor power). The feudal lord, on the other hand, loses the serf's dues and
labor services.

The same logic applies to investment in the skills of the wage worker, to the air and water
pollution that threatens the health of the worker. So the situation for the individual
employer is a contradictory one. On the one hand, a healthy, well-fed workforce is
desirable. But paying a wage to cover these exposes the employer to the competition of
other capitalists. As a result it is only through the state that the capitalist class can act in a
way that will facilitate the reproduction of labor power: e.g., the passage of laws on
health and safety in the workplace, the passage of laws governing public water supplies
and sewerage, the passage of minimum wage laws, and laws governing the quality of
housing, the introduction of unemployment compensation so that labor will stick around
until the next uptick in the economy.

Note also, however, that from the standpoint of the individual firm, the substitutability of
the individual worker can be in question. This means that for some the employers logic
may be different. In order to hang on to the worker, in order to ensure that he/she is
healthy and able to deliver once the firm has made an investment in their labor power, a
higher wage will be paid, along with health care insurance. So position in the (technical)
division of labor makes a difference since people in some positions are less substitutable
than people in others.

Suggested Additional Reading


Susan Himmelweit (1983), value of labor power. Pp.512-514 in Tom Bottomore (ed.),
Dictionary of Marxist Thought. Oxford: Basil Blackwell.

On the role of the state: Suzanne de Brunhoff, "State Management of Labor Power".
Chapter 1 in her The State, Capital and Economic Policy. London: Pluto Press.

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On the reproduction of labor power in the context of migrant labor: Harold Wolpe,
Capitalism and Cheap Labor Power in South Africa: From Segregation to Apartheid".
Chapter 8 in Wolpe (ed.) The Articulation of Modes of Production. London: Routledge,
Kegan and Paul. Also useful on this topic: Michael Burawoy. 1976. The Functions and
Reproduction of Migrant Labor: Comparative Material from Southern Africa and the
United States. American Journal of Sociology 81:5, 1050-1087.

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